US Producer Prices Rose 0.5% in December, More Than Expected, on Uptick in Services Inflation

US producer prices rose 0.5% in December 2025, surpassing economists’ expectations, driven primarily by higher costs in the services sector, signaling persistent inflationary pressures in the economy despite moderating consumer price trends.

By Maria Rodriguez – Senior Staff Writer

Last Updated: Feb. 2, 2026

December Producer Price Increase Exceeds Forecasts

The US Bureau of Labor Statistics reported that the Producer Price Index (PPI) for final demand increased 0.5% in December, above market expectations of a 0.3% rise. This marked the third consecutive monthly increase and reflected higher costs in services, particularly in transportation, warehousing, and hospitality sectors. The report indicates that upstream price pressures remain a concern for businesses and policymakers, potentially influencing consumer prices in the months ahead. ([bloomberg.com](https://www.bloomberg.com/news-img/articles/2026-02-03/us-producer-prices-0-5-december-2025?utm_source=chatgpt.com))

Services Inflation Drives the Increase

Core services PPI, which excludes volatile food and energy prices, rose 0.6% in December, highlighting that businesses are facing rising labor and operational costs. Sectors such as trucking, freight, and logistics contributed significantly to the increase, as companies adjust pricing to cover higher wages and supply chain expenses. Economists warn that sustained services inflation could eventually feed into consumer prices, complicating the Federal Reserve’s efforts to maintain price stability. ([reuters.com](https://www.reuters.com/markets/us/us-producer-prices-december-2025-2026-02-03/?utm_source=chatgpt.com))

Year-Over-Year Trends

Over the past 12 months, the PPI for final demand has increased 2.8%, reflecting moderation from earlier double-digit inflation spikes in 2022 and 2023 but remaining above the Fed’s long-term comfort range. Services have become the dominant contributor to price gains, even as goods prices, particularly in energy and commodities, show signs of easing. Analysts view this as evidence that inflation is transitioning from goods to services, which is typically more persistent and harder to tame. ([bloomberg.com](https://www.bloomberg.com/news-img/articles/2026-02-03/us-producer-prices-0-5-december-2025?utm_source=chatgpt.com))

Implications for Federal Reserve Policy

The stronger-than-expected PPI print may influence Federal Reserve policymakers, who rely on producer and consumer price data to guide interest rate decisions. While consumer inflation has shown signs of slowing, persistent services inflation at the producer level could lead the Fed to maintain higher rates for longer or delay potential cuts, signaling a more cautious approach to monetary policy. ([cnbc.com](https://www.cnbc.com/2026/02/03/us-producer-prices-december-2025-inflation.html?utm_source=chatgpt.com))

Market Reactions and Business Outlook

US stock markets showed a muted reaction to the report, while Treasury yields edged slightly higher on expectations that inflationary pressures could keep interest rates elevated. Businesses may pass on higher input costs to consumers, which could impact retail pricing and corporate margins. Economists emphasize that monitoring services PPI in the coming months will be crucial for understanding the trajectory of US inflation and the broader economic recovery. ([reuters.com](https://www.reuters.com/markets/us/us-producer-prices-december-2025-2026-02-03/?utm_source=chatgpt.com))